Academic journal article Entrepreneurship: Theory and Practice

Managing Resources: Linking Unique Resources, Management, and Wealth Creation in Family Firms

Academic journal article Entrepreneurship: Theory and Practice

Managing Resources: Linking Unique Resources, Management, and Wealth Creation in Family Firms

Article excerpt

The appropriate resources are necessary but insufficient to achieve a competitive advantage. Resources must also be managed effectively. Herein, we develop a resource management process model composed of three components that can lead to a competitive advantage. These components include the resource inventory (evaluating, adding, and shedding), resource bundling, and resource leveraging. We examine resource management in family firms and thus explore the unique characteristics of five resources and attributes of family firms that provide potential advantages over nonfamily firms. The resources are human capital, social capital, patient capital, survivability capital, along with the governance structure attribute.

Introduction

Several scholars propose the use of strategic management as an organizing framework in family business research (Sharma, Chrisman, & Chua, 1996). In particular, family business firms must manage resources effectively in order to compete in today's dynamic markets. In so doing, they must identify and exploit opportunities in the market while simultaneously gaining and sustaining a competitive advantage (Hitt, Ireland, Camp, & Sexton, 2001, 2002). The resource-based view (RBV) of the firm, a prominent theory in strategic management, provides the logic to understand how family firms can simultaneously seek opportunities and competitive advantage.

Family firms have several unique resources that have been referred to as the "familiness" of the firm (Cabrera-Suarez, De Saa-Perez, & Garcia-Almeida, 2001; Habbershon & Williams, 1999). Habbershon and Williams (1999) describe familiness as the unique bundle of resources created by the interaction of family and business. Familiness can create both advantages and disadvantages. Herein, we examine several unique resources of family businesses (e.g., familiness) and the effects of resource management, which together can lead to competitive advantage and wealth creation. The resources examined are human capital, social capital, patient capital and survivability capital, along with the governance structure attribute. Each can differentiate family from nonfamily firms.

Few scholars have explored how resources are managed to create a competitive advantage. Yet, this missing link is critical for understanding how resources can create value for firms (Barney & Arikan, 2001). Therefore, resource management is an important issue requiring more research. Additionally, family firms' unique attributes affect how resources can be managed to create a competitive advantage; thus research is needed on resource management in the context of family firms. Some family firm attributes provide advantages in the resource management process, while others limit this ability. Specifically, we examine the three components of the proposed resource management process model and the substages within each component. These components include the resource inventory, creating resource bundles, and leveraging resource bundles. Managing resources to create strategic resource bundles followed by the effective leveraging of those bundles creates a competitive advantage. These foci provide a unique contributi on to our knowledge of managing family and nonfamily firms.

We begin with a concise review of the RBV of the firm followed by an explanation of the pertinent and unique familiness resources. We then examine how these resources affect the resource management process model in family firms with the purpose of creating a competitive advantage and wealth.

Resource-Based View

In pursuit of answers to the central question of strategic management, "why do some firms perform better than others?" (Barnett, Greve, & Park, 1994, p. 11; Meyer, 1991), strategy scholars have investigated performance from several different vantage points. However, in the 1980s and especially over that last decade, the RBV of the firm has become the dominant perspective (Hitt & Ireland, 1985; Wernerfelt, 1984). …

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